WASHINGTON (CN) – President Obama met with bipartisan congressional leaders Wednesday to push his financial reform package, saying it “assures that we never have ‘too big to fail’ again.” Republican leaders argued that the so-called “bailout bill” does just the opposite.
The proposed bill heavily regulates derivatives, a complex class of financial instruments that helped fuel the financial crisis. Obama said the derivatives market should be brought “into the daylight so that regulators and ordinary Americans know what’s going on when it comes to this huge segment of the financial system.” He said derivatives were part of the “shadow economy,” and called for strong oversight and ramped-up consumer protection for mortgages, credit cards and debit cards.
The proposed bill lets regulators limit the risks taken by big banks and allows regulators to break up big banks that are endangering the financial system.
The legislation also requires banks to pour funds into a $50 billion pot that would be used instead of taxpayer money if the banks failed. The $50 billion fund proposal is inciting strong opposition from Wall Street firms.
The proposed legislation is being called the “bailout bill” for the measures directed at regulating big banks.
“I’m absolutely confident that the bill that emerges is going to be a bill that prevents bailouts,” Obama said. “That’s the goal.”
But Republican leadership said the bill does just the opposite. Senate Minority Leader Mitch McConnell, R-Ky., said the bill “guarantees future bailouts of Wall Street banks” through “endless taxpayer bailouts” of large Wall Street firms.
“The taxpayers have paid enough already,” McConnell said on the Senate floor. “The taxpayers have paid enough already,” he repeated.
Republicans pointed out loopholes in the legislation that would enable the government to step in to help banks again. Sen. Bob Corker, R-Tenn., who worked on the legislation, agreed that there were loopholes, but called the debate on the floor “overheated.”
McConnell argued that Democrats were ready to compromise, but were reined in by the White House, which he said wanted to make it a partisan issue. McConnell called for the two sides to get together again to work on the bill.
Chairman of the Senate Banking Committee, Sen. Chris Dodd, D-Conn., who introduced the bill, dismissed remarks by McConnell and other Senate Republicans as “utter falsehood,” insisting that the bill would not lead to additional bailouts.
The debate echoes the recent battle over health care in Congress.
Obama wants to get it passed in the next few weeks.
The House passed a similar bill in December without any Republican support.